Temporary Way Out of the Economic Crisis?

By John Revill

Staffing Company Adecco beat expectations Tuesday with a 77% surge in first quarter profit and 24% increase in sales, and said it was looking forward to further growth in what it sees as a “jobless recovery”.

This may sound strange, but it seems companies want to boost their output without incurring the large costs of hiring permanent staff.

Instead, they are busy signing the time sheets of temporary staff rather than the contracts of permanent workers as they set about rebuilding their staff numbers which were cut during the downturn.

From conversations with clients, Adecco said flexibility remained at the forefront of their priorities.

“Especially in today’s environment, with moderate GDP growth in most economies, the ability to react to sudden changes in demand, through flexible labor and lower inventory levels, is seen as an advantage by many of our clients,” said Chief Executive Patrick De Maeseneire.

“We believe that we will continue to witness a jobless recovery through most of 2011 and consequently foresee unemployment rates remaining at high levels,” he said, adding this environment offered attractive growth opportunities.

Maury Peiperl, Professor of Leadership and Strategic Change at the IMD Business School in Lausanne, Switzerland, said temporary staffing tends to lead the way during a downturn and recovery.

“During a downturn temporary staff numbers are reduced quicker because they are easier to cut, but they are also the fastest to rise during a recovery because companies want to start with lower commitments,” he said.

This time, though, the situation has been exacerbated by a general lack of confidence in the economic recovery.

Professor Peiperl said:

“Nobody wants to have massive fixed costs, that’s a disincentive to companies taking on permanent staff.”

Temporary workers often bring a breadth of experience which is not always present in a company, he added. They are often more motivated and productive too, because they understand they are with a company for a specific time and purpose.

On the downside, temporary personnel are not ideal for companies wanting to build market knowledge, or add to their reputation. They are also not ideal for creating strong teams.

Wages for temporary staff are usually comparable to permanent staff, but overhead costs are lower because it does not have to pay for holidays, sick leave and so on.

But does the increase in temporary workers mean a temporary recovery? Professor Peiperl didn’t think so.

“Any time you get more employment than less, you are better off,” he said, adding many companies would not have taken on so many permanent staff as temporary.

Often temporary workers graduate to become permanent employees.

“It also gives employees the chance to get some reasonable experience and build a network, and companies the opportunity to grow flexibly and take on permanent workers again,” he said.

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